WATCH: Mitt Romney Gets Asked About Carried Interest, And His Response Is Almost Painful

Ever since Mitt Romney's career at Bain Capital became an issue in this Presidential race, the debate about whether or not private equity firms should be taxed at a 15% rate for carried interest income has become an issue as well.

The question went quiet for a while, but it resurfaced when Mitt Romney made an appearance on CNBCs Squawk Box this morning.

Host Joe Kernan asked Romney what he would do about the carried interest tax rate, since it effects private equity (one of the country's "bright spots") so much.

Romney's response was probably not what his former colleagues in the industry wanted to hear.

He said it's not up to Congress or the Administration to decide what is carried interest income or what is a capital gain (huh?).

The question is, he pointed out, the risk of loss. If there's no risk, it should be taxed as ordinary income, simple as that.

"I think you have to look at each dimension of our income streams and ask if this is a true capital gain or carried income. And you look to either the Courts or the IRS to and look at the various structures and investment vehicles and say 'gosh is this a true capital investment with the risk of loss or is it instead ordinary income with no particular risk of loss.If it's ordinary income you should treat it as ordinary income and if it's capital gain you should treat it as capital gain. I don't believe that it's Congress' job or the Administration's job to say 'hey these people are making to much money lets change their tax rate to make them less able to be financially successful.' I think you do however need to apply the code in a way that's consistent across the board.

From the sounds of it, Romney doesn't want to make this decision at all. But if he really had to, he might make a lot of industry people upset.